July 16 (Bloomberg) -- The U.S., Canada and the European Union's combined $11 billion in annual subsidies for plant- derived fuels does little to reduce carbon-dioxide emissions, the Organization of Economic Cooperation and Development said.

The greenhouse gas released by cars, trucks, airplanes and ships ``at best'' will decline 0.8 percent by 2015 in those regions with the help of aid programs, Stefan Tangermann, the Paris-based group's director for trade and agriculture, said today at a briefing in Berlin.

``There are many more-efficient ways to protect the climate than supporting biofuels,'' he said. ``These policies are inefficient because of their high costs and limited impact on CO2 emissions.''

Governments around the world are taking steps to supplement oil and gasoline with fuel made from crops to reduce emissions. Demand for the alternative fuels has risen while rice, wheat and corn are being consumed at faster rates in developing countries. The twin effect helps drive up prices for food staples, causing some of the world's poorest to cut back on how much they eat.

Using fuel made from corn in the U.S. reduces emissions by between 10 percent and 30 percent compared with burning gasoline to drive the same distance, the OECD study said. Plant-based fuels contain less energy per unit volume than fossil fuels, and refining them consumes more energy.

Nations instead should focus on reducing fuel consumption for vehicles and end import taxes on ethanol from Brazil, which are between 25 percent and 35 percent in most wealthy countries, the OECD said.

Brazilian Discount

Brazilian production of ethanol is more efficient, reducing emissions as much as 90 percent, compared with biofuels made in the U.S. and Europe because producers use cellulose from sugar cane stocks in the manufacturing process. The South American country has potential to make and export more ethanol and currently powers 20 percent of its vehicle fleet with the fuel.

Avoiding CO2 emissions by burning biofuels costs as much as $1,700 (1,067 euros) a ton, compared with buying a permit to release the greenhouse gas from EU's emissions trading system for about $30, the study said. Permits can be created by investing in projects in developing countries that cut emissions.

State backing for low-emission fuels helps push up agricultural prices, which results in higher costs for biofuels, countering arguments that plant-based energy sources offer an affordable alternative to gasoline and diesel, Tangermann said.

Temperature Threat

The UN Intergovernmental Panel on Climate Change, or IPCC, last year said that global emissions cuts of 50 percent to 85 percent are needed by 2050 to stand a chance of containing the average increase in temperature to 2 degrees Celsius (3.6 degrees Fahrenheit). The transportation industry has done little to contribute to a decline in greenhouse gases, the panel's chairman, Rajendra Pachauri, said on May 29 at a conference to address the sector's impact on the earth's climate.

Existing policies mean that as much as 14 percent of the crop land in the EU, the U.S. and Canada will be used to grow plants for biofuels by 2017 from about 8 percent last year, the OECD said. That could push prices for some crops up by 19 percent by 2015.

Biofuels subsidies in various forms in the EU, Canada and the U.S. totaled about $11 billion in 2006 and is set to climb to $25 billion by 2015, the report said.

To contact the reporter on this story: Jeremy van Loon in Berlin at jvanloon@bloomberg.net.

Last Updated: July 16, 2008 07:40 EDT